On May 29, we upgraded chemical maker Celanese Corporation (CE) to Outperform based on improved earnings visibility. We are also encouraged by its commitment to boost shareholder returns through higher dividend payouts.
Why the Upgrade?
Celanese’s first-quarter 2013 adjusted earnings, reported on Apr 18, outpaced the Zacks Consensus Estimate while sales missed. While Celanese envisions challenging economic conditions to sustain moving ahead, it expects earnings to rise on the back of company-specific initiatives.
Earnings estimates for Celanese are on the upswing following the release of the first quarter results. The Zacks Consensus Estimate for 2013 has gone up roughly 8% to $4.61 per share. On a similar note, the Zacks Consensus Estimate for 2014 has also increased around 6% to $5.23. With the Zacks Consensus Estimates for both 2013 and 2014 going up, Celanese now has a Zacks Rank #1 (Strong Buy).
Celanese is among the world’s largest producers of acetyl products as well as the leading global producer of high-performance engineered polymers. The company’s strong presence in emerging markets will enable it to deliver incremental earnings in 2013.
Celanese has taken up cost-cutting measures and the necessary steps to run its plants better to counter weak demand. It is aggressively expanding capacity in the emerging Asian markets. Its expansion initiatives in China are expected to support earnings growth. The company’s integrated chemical complex in Nanjing, China, serves as a base for expansion in Asia, supporting the region's increasing demand.
Moreover, Celanese remains focused on returning value to its shareholders, backed by strong cash flows. Its Board, in April 2013, approved a 20% hike in the quarterly cash dividend to 9 cents a share.
Other Stocks to Consider
Other companies in the chemical space that are worth considering include Shin-Etsu Chemical Co., Ltd. (SHECY), Methanex Corporation (MEOH) and WD-40 Company (WDFC). While Shin-Etsu Chemical and Methanex retain a Zacks Rank #1 (Strong Buy), WD-40 holds a Zacks Rank #2 (Buy).
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